Update: Telecommuter Tax Debate Continues

Written by
Stephanie Vaz

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Insource recently published an update to the COVID-19 Telecommuters Tax issued by the Massachusetts Department of Revenue (DOR). However, the State of New Hampshire has now filed a Motion For Leave To File Bill Of Complaint with the United States Supreme Court challenging the latest final rule.

Due to social distancing measures and other restrictions, multiple states have declared states of emergency, resulting in businesses and employees adopting telecommuting arrangements.

The new ruling from the DOR is expecting New Hampshire residents who were commuting before COVID-19 restrictions to continue to pay Massachusetts tax, while no longer using the services paid for by said income tax, such as police, fire, and roads. The State of New Hampshire has argued that any attempt to tax residents who no longer travel to Massachusetts to work infringes on the state’s sovereignty.

It is part of the New Hampshire state’s identity to have a lack of income tax. This lack of taxation has boosted per capita income and lowered the unemployment rate. This ruling, although temporary, could affect the state’s economy. There were about 80,000 commuters from New Hampshire to Massachusetts before the pandemic. New Hampshire officials believe this ruling will lead to a permanent shift in underlying policy and represents an aggressive approach for Massachusetts to impose income taxes beyond its borders.

It should be noted that the regulation remains effective until repeal – meaning Massachusetts-based employers of New Hampshire residents must pay income tax to the Massachusetts DOR. Similarly, employees should continue paying their Massachusetts income tax obligations. However, individuals should also preserve their rights to claim a refund in the event the Supreme Court rules in their favor.

To stay up to date with further developments from the Massachusetts Department of Revenue, be sure to follow Insource Insights. You may be interested in the latest update to PPP Loan Forgiveness here.

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